Stay short, as the opportunities are still leaning towards the sellers. The SGX FTSE China A50 ended 362.50 pts lower at yesterday’s close to 11,332.50 pts. It left a black candle that breached below the previous 11,400-pt support, which implied the session was led by the bears. In the daily chart, we see that the index has dropped for five sessions in a row to its 10-month low. This shows the strength of the bears. Moreover, we also highlight that the 100-day SMA line has crossed firmly below the 200-day SMA line, which points towards a weak outlook. This enhances our bearish view.

In the absence of any strong positive momentum, this implies the opportunities are still leaning towards the sellers. Hence, we maintain our short recommendation. In order to minimise the trading risk, we advise setting a stop-loss above 12,320 pts. This is in line with our initial short recommendation on 31 May, after the bears took control of market sentiment from the bulls below the 12,060-pt level.

The immediate support is now at 11,115 pts, which was derived from the low of 4 Jul 2017. For the next support, look to 10,735 pts, ie 30 Nov 2016’s high. Towards the upside, our immediate resistance is now set at 11,400 pts, or the low of 14 Aug 2017. Should the SGX FTSE China A50 rebound above this level, the following resistance is found at 11,985 pts, or the low of 31 May’s “Bullish Engulfing” pattern.

Source: RHB Securities Research - 28 Jun 2018